Recently a couple of attorneys have discussed their concerns about the effect on AIG, of the Spitzer settlement with the company so I thought it was time to address this in a new post. The subject was partly covered in a previous post on February 10,2006 where I discussed that the settlement number, while sizeable, did not have a major effect on the long term viability of the AIG brand. This is now underscored by today's news, reported in Business Insurance, in which it stated that "American International Group Inc. posted a profit of $10.48 billion for 2005, up 6.5% over 2004, though its fourth-quarter net income fell 72% to $444 million", largely due to the settlement being charged to the fourth quarter.
Whatever the industry, or in sports, people seem to like to bring down the big guy. In this case the big guy, AIG, seems to have suffered only a small "hair pull" out of some very strong legs. I'm sure AIG wishes that they didn't have to pay it. However there's no need for paranoia. The information about the amount of settlement is newsworthy but, like most things these days, media sensationalism needs to be discounted. It is important to look at the big picture (with numbers taken in context) before making rash and possibly costly decisions.
When it comes to structured settlements involving American General Life and American International Life Insurance Company of New York (which are AIG Companies), and other structured settlement annuity issuers for that matter, financial results may be on the consolidated balance sheet of the holding company parent but they still must stand on their own with state regulators.